Avoiding the Obamacare Tax (Penalty)Avoiding the Obamacare Tax (Penalty)

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By now, most of us know that U.S. Supreme Court Chief Justice John Roberts upheld “Obamacare” by ruling that the penalty imposed upon a person for failure to purchase health insurance is not a penalty, but is actually a tax.

For those individuals who are self-employed or retired and do not have W-2 wages withheld, it may be possible to avoid buying insurance and also avoid paying the tax/penalty.

Here’s why: The government can only collect the tax/penalty for failure to purchase health insurance from any tax refund which you have coming. So for those of us who do not have W-2 income from an employer, the only way for there to be a tax refund is if you overpay the quarterly estimated tax. Therefore, if you or someone you know, e.g. a young, healthy person, chooses to not purchase health insurance, if you do not have W-2 reported income, i.e. income paid by an employer, then all that needs to be done is make sure no refund is due and the tax/penalty cannot be collected.

So you say, this is irresponsible, and what if I have a medical problem? First of all, you can never be turned away from an emergency room, so emergencies are covered. If you are diagnosed with a problem necessitating ongoing and extensive treatment, since you cannot now be denied coverage due to a pre-existing condition, you can wait to buy your health insurance when you need it. This is like buying fire insurance only after your house burns down, the only difference being that you cannot really buy fire insurance after your house burns down (at least not until fire insurance is included in the list of guaranteed rights), but you can buy health insurance after your health deteriorates.

So why would anyone pay thousands every year for health insurance coverage under Obamacare? If your typical health expenses are from periodically seeing the doctor for an antibiotic or a checkup, why not just pay for those expenses out of pocket when incurred and only buy the insurance when something really bad happens? And we wonder why the price of health insurance premiums is skyrocketing.

Sure, you may not handle your healthcare this way, but you can be sure many people will, with the result that fewer people will be paying premiums, but the insurance companies will still be on the hook for the big ticket illnesses when the very sick purchase their insurance only when they need someone to pick up the $50,000 tab for a new knee. The only way to cover these additional costs related to the flood of people buying insurance only after incurring a major health problem will be to raise the premiums for those who pay for their health insurance as they go.

Stay tuned…

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Mark L. Dodds